Markets
How Crypto’s Richest Billionaire Doubled His Net Worth Behind Bars
The Binance founder, known to crypto enthusiasts as CZ, is spending the summer at Lompoc Minimum Security Prison in Santa Barbara. As crypto markets soar, Forbes reveals the secret source of its skyrocketing billions.
By Javier Pazthe Forbes team and Steven EhrlichForbes team
Prison has been good for Binance founder Changpeng Zhao. Already the richest person to ever be behind bars and the richest person in crypto multiple times, Zhao’s net worth has skyrocketed since becoming a criminal.
Forbes now estimates its worth at $61 billion, making it 24ththe richest person in the world, just after Julia Koch and her family. The second richest person in crypto is Coinbase founder Brian Armstrong with $11 billion.
The upward revision of CZ has two parts. First, its 90% stake in Binance, the major cryptocurrency exchange, is valued at $33 billion despite CZ resigning as CEO in November 2023 as part of a deal with the US Department of Commerce. Justice in which he pleaded guilty to anti-money laundering. and sanction violations. His company also paid a $4.3 billion fine to the government. However, the impact on Zhao’s personal wealth was less severe, as he only had to pay a $50 million fine. In the six months since its plea, Binance has actually increased its dominance among crypto exchanges around the world in terms of trading volume (although it was excluded from Forbes List of Most Trusted Crypto Exchanges.) According to data compiled by The Block, his share of the total spot market across all exchanges rose to 42% in the six months since he left the company, compared to an average of 38% during during the two months preceding its payment.
BNB AGAINST BITCOIN AND ETHEREUM
Performance since the beginning of 2024
The big change in CZ’s net worth comes from Forbes’ discovery of his personal holdings in his publicly issued BNB token, which we estimate at 94 million tokens, or 64% of the total 147.5 million BNB tokens in traffic. Forbes estimates that Binance holds 71% of the BNB supply.
Despite the exchange’s legal issues, BNB has seen a surge in 2024, far outpacing other major cryptocurrencies such as bitcoin (up 54%), ether (up 53%), and solana (up 49%). BNB recently hit an all-time high of $714, giving it a market capitalization of $110 billion.
What is BNB? Binance coin or BNB was initially launched in 2017 as a fundraising tool for CZ to launch its new exchange. Tokens like BNB are created by the developers who run the crypto projects and are similar to airline loyalty points rather than actual shares of a company, although they trade on crypto exchanges like stocks and are sought after by investors. Tokens like BNB offer no ownership but reward holders, who are often customers, with discounts for trading or as an incentive to recruit new account holders. They are often used, in the words of a former FTX insider, whose FTT exchange token the company led to its spectacular fall, as “a form of action because there is no public equity”. The Securities and Exchange Commission appears to agree, as it is currently suing Binance for selling BNB to US customers as an unregistered security.
Changpeng Zhao, 47, built his BNB stockpile in two ways. Binance was established in 2017, and he and the founding team received 80 million tokens out of a total supply of 200 million BNB. Forbes’ forensic analysis of the wallets that received these tokens, conducted in collaboration with Gray Wolf Analytics, indicates that the company holds 46.2 million of the original 80 million tokens. CZ is credited with 41.6 million BNB of this amount due to its 90% stake in Binance.
The second component of CZ’s wealth is more obscure. The results of a survey published by Forbes and conducted with Gray Wolf in October 2023 revealed that the Binance ICO was initially undersubscribed, leading CZ and his company to funnel unsold shares into wallets that he controlled. In 2017, Binance claimed to have sold 100 million BNB for $0.15 each, for a total of $15 million. Our analysis last fall showed that no more than 10.8 million BNB were sold, for less than $5 million.
OWNERSHIP OF BINANCE BNB
Current BNB supply: 147.5 million
In its official whitepaper, which functions in the crypto world as a pseudo prospectus for ICO investors, Binance did not reveal what would happen to unsold tokens. Ultimately, scientific analyzes show that they were placed in wallets owned by Binance. Today, we estimate that these wallets contain 58 million BNB, worth $35 billion at the current price of $602. CZ’s 90% stake in Binance would net it just over 52 million additional BNB. In total, we believe he owns almost 94 million BNB tokens. Lawyers for Binance and CZ did not respond to our requests for comment on CZ’s holdings.
The value of the Binance founder’s holdings today would be $56.6 billion, but given that Zhao is unlikely to get anywhere near that amount if he tried to sell, Forbes applied a liquidity discount of 50% on its participation. Currently, BNB trading volume stands at approximately $1.6 billion worth of tokens per day.
Although it claims to have 200 million customers worldwide, very little is known about the inner workings of Binance (it has never been audited) and more than 53% of all transactions of BNB take place on Binance’s own exchange. Over the past month, BNB has gained around 5%, which on paper represents around $3 billion in gains for the Binance founder. As Zhao serves his four-month sentence, soaking up the California sun in the courtyard of the Lompoc II Federal Correctional Institution, he sees his billions in BNB grow.
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